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Buy to Let

Buy-to-Let Mortgage

A rental property can be a great asset, providing you with regular income as well as being an investment for the future. Whether it’s your first venture or you’re expanding your portfolio, we can find you the right mortgage, so all you have to do is find the right tenant.

A buy-to-let mortgage is type of mortgage that allows you to buy a property for investment purposes. This means, that you plan to rent out the property for someone else to live in.

Yes, for a buy-to-let mortgage, you’ll need at least a 25% of the property’s value. There’s several ways to raise the funds, including taking out a homeowner / secured loan.

Buy-to-let mortgages are seen as a little riskier for the lender, because the property is being lived in by a third party (your tenant). As a result, the interest rates can be a little higher, to reflect that risk and you will need a larger deposit (between 25% – 40%).

Most buy-to-let mortgages are arranged as interest-only mortgages, meaning that your monthly payments will only cover the interest, and you’ll pay off the mortgage in full at the end of the term (usually through the sale of the property – although if house prices fall, you will have to make up any shortfall).

That depends on the property and how much rental income you can expect to receive. Most lenders would want your monthly rental income to be 125% of your monthly interest payments. For example, if your monthly interest payments were £500, then the lender would expect you to charge a minimum of £625 in rent.

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*Representative example: A mortgage of £75,000 on interest only payable over 25 years, initially on a fixed rate of 1% for 13 months and then a Standard Variable Rate, currently 4.74%, for the remaining 287 months. This would require 13 monthly payments of £63.75 and then 287 monthly payments of £302.18 (this includes a broker fee of £750 and a lender fee of £1500 to be paid upon completion). The overall cost for comparison is 4.8% APRC.

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